Mylan Inc. Reports Second Quarter 2014 Adjusted Diluted EPS of $0.69, In Line With Guidance

PITTSBURGH, Aug. 7, 2014 /PRNewswire/ -- Mylan Inc. (Nasdaq: MYL) today announced its financial results for the three and six months ended June 30, 2014.

Second Quarter 2014 Highlights

• Total revenues of $1.84 billion, up 8% versus the prior year period with positive growth across all regions and businesses
  • Generics segment third party sales of $1.53 billion, up 6% on a constant currency basis
  • Specialty segment third party sales of $287.8 million, up 22%
• Adjusted gross profit of $923.4 million, up 11%; GAAP gross profit of $808.8 million, up 9%
• Adjusted gross margin of 50%, up from 49% in the prior year period; GAAP gross margin of 44%
• Adjusted diluted earnings per share (EPS) of $0.69, an increase of 1% and in line with company guidance; GAAP diluted EPS of $0.32
• Total revenue guidance for 2014 narrowed to $7.8 billion to $8.0 billion; adjusted diluted EPS guidance for 2014 narrowed to $3.25 to $3.45
• Reaffirms opportunity to accelerate target of at least $6.00 in adjusted diluted EPS in 2018.⁽¹⁾

Mylan CEO Heather Bresch commented, “We continued to deliver strong results in the second quarter of 2014, driven by double-digit revenue growth in our Specialty business and Rest of World region, and continued solid performance in Europe and North America. We were able to achieve these results, which were right in line with our expectations, despite ongoing delays in approvals of key products by the U.S. Food and Drug Administration, once again demonstrating our ability to execute and maximize our global platform and commercial opportunities.

“Further, the recently-announced strategic acquisition of Abbott’s non-U.S. developed markets specialty and branded generics business builds on our strong momentum, expands and further diversifies our business in our largest markets outside of the U.S., and clearly positions Mylan for the next phase of our growth. The anticipated enhanced financial flexibility created by this transaction immediately positions us to execute on additional highly strategic and financially accretive transactions in the near term. As a result, we see opportunities to accelerate achievement of our $6.00 adjusted diluted EPS target in 2018.

“With that said, given the pendency of the Abbott transaction and management’s current activities around additional strategic opportunities, we will be postponing our Investor Day until a later date.”

Mylan CFO John Sheehan added, “Our second quarter results saw continued growth across all of our regions and businesses, and we look forward to a strong second half of 2014. In addition, during the second quarter, we continued to generate strong cash flows which further improves our financial flexibilityflexibility that will be additionally enhanced through the proposed Abbott transaction.”

Generics Segment Revenue

Genericssegment third party net sales were $1.53 billion for the quarter, an increase of 5% when compared to the prior year period. When translating third party net sales for the current quarter at prior year comparative period exchange rates (“constant currency”), third party net sales would have increased by 6%.

• Third party net sales from North America were $736.6 million for the quarter, an increase of 3%. The increase was due principally to sales from new products, and to a lesser extent, net sales from acquired businesses partially offset by pricing and volume on the base business. The effect of constant currency on third party net sales was insignificant in North America.
• Third party net sales from Europe were $395.9 million for the quarter, an increase of 10%, or 5% on a constant currency basis. This increase was primarily the result of increased volumes in Italy and France combined with sales from new products, and to a lesser extent, net sales from acquired businesses within the region. These increases were offset partially by lower pricing throughout Europe as a result of government-imposed pricing reductions and competitive market conditions.
• Third party net sales from the Rest of World were $396.0 million for the quarter, up 6%, or 11% on a constant currency basis. This increase was driven primarily by higher third party sales volumes from our operations in India, in particular strong growth in the anti-retroviral (ARV) franchise, which manufactures products used in the treatment of HIV/AIDS. Sales also were impacted positively by volume growth and new product introductions in Japan. In Australia, local currency third party net sales decreased versus the comparable prior year period as a result of significant government-imposed pricing reform and lower volumes on existing products, partially offset by new products.

Specialty Segment Revenue

Specialtysegment reported third party net sales of $287.8 million for the quarter, an increase of 22% when compared to the prior year period. The increase was due to higher sales of the EpiPen® Auto-Injector driven by market expansion, as well as price. The effect of constant currency on Specialty segment third party net sales was insignificant. The EpiPen® Auto-Injector remains on track to become a billion dollar product in 2014.

Total Gross Profit

Adjusted gross profit was $923.4 million and adjusted gross margins were 50% as compared to adjusted gross profit of $834.2 million and adjusted gross margins of 49% in the comparable prior year period. Strong adjusted gross margins were the result of growth in the EpiPen® Auto-Injector combined with the benefits and efficiencies of Mylan’s vertically integrated operating platform. These increases were offset partially by unfavorable pricing on existing products, including products launched in the prior year. GAAP gross profit for the quarter was $808.8 million and GAAP gross margins were 44% as compared to GAAP gross profit of $742.4 million and GAAP gross margins of 44% in the comparable prior year period.

Total Profitability

Adjusted earnings from operations for the quarter were $409.9 million, down less than 1% from the comparable prior year period. The decrease in adjusted earnings from operations was due to an increase in SG&A and R&D. The increase in SG&A was impacted by our direct-to-consumer marketing campaign for the EpiPen® Auto-Injector, and to a lesser extent, by increases in legal and marketing costs in the North American region of the Generics business to support anticipated new product launches. R&D was at the high end of the guidance range as we continued to progress our biologics and respiratory growth platforms. GAAP earnings from operations were $226.1 million for the quarter, a decrease of 27% from the comparable prior year period.

EBITDA, which is defined as net income (excluding the non-controlling interest and losses from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $371.8 million for the quarter and $423.1 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $488.1 million for the quarter and $461.0 million for the comparable prior year period. GAAP net earningsattributable to Mylan Inc. decreased by $52.5 million, or 29.5%, to $125.2 million as compared to $177.7 million for the prior year comparable period.

Cash Flow

Adjusted cash provided by operating activities was $559 million for the six months ended June 30, 2014, compared to $283 million for the comparable prior year period. The increase in adjusted cash provided by operating activities is the result of working capital improvement. On a GAAP basis, cash provided by operating activities was $448 million for the six months ended June 30, 2014, compared to $274 million for the comparable prior year period. Capital expenditures were approximately $153 million for the six months ended June 30, 2014 as compared to approximately $126 million in the comparable period in 2013.

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